GAO decides Congress can review auto loan guidance
The investigative arm of Congress said Tuesday that guidelines issued by the Consumer Financial Protection Bureau to prevent discriminatory pricing in auto lending are subject to Congressional review.
The guidance amounts to a formal rule and should have been submitted to Congress, the US Government Accountability Office said.
The CFPB introduced the guidance in 2013 to hold lenders that offer auto loans through dealerships responsible for discriminatory pricing based on factors such as race, sex or national origin.
It targeted so-called dealer mark-ups, or additional interest auto dealers can charge over loans they originate for third-party lenders.
Dealers can receive compensation from the lenders if they manage to charge the borrowers a higher interest than the lender had offered.
But critics argue that the cost of compliance has been a burden for financial institutions.
“There has been a significant increase in the cost of compliance at the lender level,” said Alan D. Wingfield, a partner at Troutman Sanders who has represented financial institutions on enforcement actions in the sector.
“Banks and lenders are being corralled into being an enforcer.”
In March, US Senator Pat Toomey asked the GAO to decide the guidelines constituted actual rules that could potentially be voted down under the 1996 Congressional Review Act.
His request is part of a broader effort by Congressional Republicans to repeal Obama-era regulations that targeted the financial services sector.
Responding to a similar request from Sen. Toomey, the GAO determined in October that guidance issued by the main US bank regulators on leveraged lending could similarly be voted down by Congress.
The CFPB did not immediately respond to a request for comment.